Will Social Security be there for you?

Every day I work with people to put strategies in place to optimize their retirement income.

A big part of this is helping to identify and implement their optimal claiming strategy for Social Security. This is more complex than it sounds as there are nine different claiming options for a single individual and 81 different options for a married couple.

Choosing the right option could mean the difference of $100,000 over the course of retirement, so it is essential to plan correctly in order to maximize your Social Security benefit. There are many different software programs out there that can help with this. The problem is all of these programs have one thing in common…they don’t account for Social Security reform or insolvency.

According to The 2013 OASDI Trustees Report, officially called “The 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,” Social Security will be exhausted by 2033. Retirees thereafter will only receive a portion of their expected retirement benefits. While this issue appears to be very difficult to resolve, very little has been done by our elected officials to put the program back on the right track for the future. As a result, there is uncertainty surrounding the long-term stability of the program, making it unwise for younger boomers and the generations after to count on Social Security as a guaranteed source of income in retirement.

While Social Security was never intended to be the sole source of income in retirement, it does makeup a significant portion for millions of retirees nationwide. However, going forward, the reliance on this program for tomorrow’s retirees should be limited.

In this modern retirement landscape, yesterday’s rules no longer apply. Following in your parent’s retirement planning footsteps is not an option and planning for retirement now requires a different way of thinking, saving and preparing. You must take responsibility for your future quality of life in the golden years and with the looming possibility that the government may only be providing limited assistance, if any; it’s extremely important to start now and plan ahead.

The good news: If you’re retired or within five years of retirement: you’re in luck. The likelihood of any significant changes to your Social Security benefits appears to be low. But, it is also important to structure your retirement benefits to provide the maximum payout and protect the rest of your retirement savings so it can continue to work for you throughout retirement.

If you are between five and 19 years to retirement, your retirement benefits will likely not be affected, but it is still a good idea to get a retirement income “backup plan” in place. This will require you to save diligently and invest for your future to create enough of a cushion to cover any potential changes to your Social Security income. The good news; you’re still working and have time to “catch up” on your savings as needed. If you’re 50 or older, making catch-up contributions to your retirement accounts or using accounts with compounding interest are helpful ways to maximize assets for retirement.

If you have more than 19 years left until retirement and plan to retire after 2033, you may well be facing a new retirement reality that could include reduced Social Security, higher taxes and more responsibility to save, invest and adequately provide for your own retirement future. As of now, you can expect approximately 75 percent of your anticipated retirement benefits, so it is vital that you prepare. One of the quickest ways to build wealth for retirement is through an employer-sponsored plan, such as a 401(k) (especially if you receive an employer match on your 401(k) contributions) in addition to saving with an IRA (Individual Retirement Account.) But that’s just the beginning – you’ll likely need more than your annual contribution limits allow for, so you must save and invest through additional methods as well. The quality of life in your future retirement depends on how well you save and invest today.

With the future course of Social Security still unknown, now more than ever it is essential that you have a plan in place for your future. Ultimately, it is best to strive to have contingencies in place to provide a source of income in retirement that will supplement, or completely replace Social Security if need be. But don’t make the mistake in thinking that you have “plenty of time” – the golden years have a tendency to sneak up on you, so make a commitment to saving today.

Don Chamberlin (shown above) is a veteran financial adviser and the president and CEO of The Chamberlin Group, a St. Louis-based holistic financial advisory firm that offers tax preparation, financial planning and wealth management services. He founded The Chamberlin Group in 2002 with the ultimate goal of assisting families who wish to preserve their legacy for themselves and their family.